Central banks of some of the world’s wealthiest countries, known as G-20, are considering a debt swap deal for Africans that will help to cushion the effect of the Coronavirus Disease.
The deal, which is being managed by a United Nations steering committee, will work in such a way that African countries can be relieved of their debt repayment obligations, without triggering the consequences that come with default.
According to the Executive Secretary of the UN Economic Commission for Africa, Vera Songwe, if this deal eventually comes to fruition, payments on international bonds that are due this year would be channelled back to African countries.
Meanwhile, investors would receive compensation in the form of securities issued by an international organisation that would be set up and guaranteed by the unnamed G-20 central banks.
She noted that the arrangement was akin to the 1980s Brady plan, which converted bank loans owed by countries in Latin America into securities that were guaranteed by U.S. treasuries.
Songwe explained that only three African countries expressed interest in the arrangement, noting that the loan swap deal would allow private creditors to join the debt relief plan for low-income countries that had been hit hard by the pandemic.
Although Songwe did not disclose the names of the African countries that indicated interest, there are indications that Nigeria could be among them. This is because last April, the country’s Minister of Finance and National Planning, Zainab Ahmed, disclosed that the country had approached some multilaterals for debt deferral.
Nigeria was already facing various challenges prior to the COVID-19 pandemic, which only made things worse.
